Countrywide / Sub2 - Posted by Brian (ATL)

Posted by John Burley on January 22, 2003 at 01:24:51:

while it is true that two separate agreements (my recommended way of going) do put you in a better position in front of a judge for eviction purposes.

It in no way avoids DOS on a conventional/FHA loan. An option, while not a transfer of equitable interest, is a violation of the St. Germaine Act.

I trust that helps.

Good Investing,

John Burley

Countrywide / Sub2 - Posted by Brian (ATL)

Posted by Brian (ATL) on January 16, 2003 at 13:37:29:

Hi Everyone,

I’ve read the archives on this subject, but want to throw it out again as I have a deal on the table that involves Countrywide.

I would like to take the property Sub2, but could switch to a L/O if I had to. It’s apparent that Countrywide did call some notes due that were taken on Sub2, but why did they do this? Was this do to someone (seller) giving them way too much information - or just something they crack down on religiously?

The Deal:

It’s a VA loan with Countrywide. Seller is 2 mos. behind.

FMV: 170
Liens: 152k
Payment 1150 a mos.

I have a T/B lined up for 1400 a mos and 3500 down.

From what I’ve read on the boards, Countrywide has only called loans due when someone(seller) alerted them to the assignment of beneficial interest occurring.

Does anyone have any recent info on Subject 2 transactions with Countrywide. I appreciate any of your comments/feedback based on experience.

Thanks again,


VA loans avoid subject to with a Land Contract - Posted by John Burley

Posted by John Burley on January 19, 2003 at 01:16:56:


VA loans are like gold. You can take (equitable) title and control without assuming the loan or having to qualify or violating the DOS. I have done over 500 of them.

Good Investing,

John Burley

Malarky - Posted by Jim FL

Posted by Jim FL on January 17, 2003 at 22:30:00:

IF everything goes according to plan with a subject to deal, whether it is country wide or not, your chances of the loan being called due are minimal.
Keep the payments up, keep the house insured, pay the taxes, and you’ll have no problem.

I’ve bought quite a number of houses sub2, plenty of which were CW loans.
I’ve even talked to countrywide to get them to send insurance escrow money to a new insurance company.
We changed because we got better rates, and increased cash flow.
It was a non over occupied policy, listing the trust and the lender as the insured.
Was not a problem.

Each case I’ve read about, viewed docs faxed to me about, or talked to investors about, SOMEONE TOLD THE LENDER, or PAYMENTS WERE NOT MADE.
Usually both.

Make sure your paperwork is VERY CLEAR, explaining how the transaction will take place, be sure to explain to the seller how it will work.
Remind the sellers, verbally and in writing, NOT to notify the lender.
Make sure they know that doing so will make you lose the house possibly, as well as their credit getting damaged when the loan gets called.
I am VERY blunt with my sellers, and tell them straight out not to tell the lender.
Their is risk involved with this type of transaction, but we know how to minimize it, and doing so will provide a solution to the sellers most immediate problem.

I’d not pass on a good deal just because the loan was held by CountryWide.

Although honestly, take a closer look at your deal here.
With the numbers you gave, I agree with TRandle in another response.
This seems a bit skinny to me.
If you go ahead with it…
I’d make sure the buyers were closer to getting a loan than not.

Goos luck,
Jim FL

Re: Countrywide / Sub2 - Posted by TRandle

Posted by TRandle on January 17, 2003 at 09:40:46:

My recollection of these various C/W threads over the years is always the same. Someone tipped them off or got behind on payments. I have had C/W Sub2 deals and still do and have not had any issues.

As someone else mentioned, there is supposed to be a provision allowing the purchase of properties with VA loans on a contract for deed. I used to have the info bookmarked, but couldn’t find it.

If I were you, I wouldn’t concern myself as much with who the lender is on the underlying loan. I think I’d spend more time looking at why I wanted to buy something at 90% LTV. If your market drops 10%, you’ll be at 100% LTV. Then, if you do need to refi for some reason, you’ll be looking at having to come out of pocket 20k in all likelihood or be faced with making other tough decisions.

my two cents…

Re: Countrywide / Sub2 - Posted by Heather -Tx

Posted by Heather -Tx on January 17, 2003 at 06:44:33:

Will let you know :slight_smile: Am in a sub2 right now with Countrywide, in the rehabbing phase as we speak. So far, so good… but I’m keeping my fingers crossed!

It is a Sub2,Preforclosure, Rehab! I’m learning ALOT lol

Re: Countrywide / Sub2 - Posted by Annette

Posted by Annette on January 16, 2003 at 17:09:28:

It is my understanding that you may do a Land Contract on a VA loan, as these are allowable by VA. Take this with a grain of salt,as it is just from memory, but I think Bronchick addresses this in “Alternative Real Estate Financing”.

Why banks call Notes Due - Posted by Sean

Posted by Sean on January 16, 2003 at 14:53:42:

Countrywide calls a note due because equitable title has changed hands. They don’t know you from adam, why should they basically be financing a loan to you? (or let the seller loan their money to you indirectly) Their loan to the seller was to the seller and tied the mortgage on that house. If any change in the title of that house occurs, either legal title, or equitable title, their mortgage is at risk.

Personally I am amazed more banks don’t call notes when Lease/Options or Subject To deals happen. If I was the bank, I know I would.

May not be nice for investors, but that’s the way it is.

Have you ever done this …? - Posted by MoniqueUSA

Posted by MoniqueUSA on January 19, 2003 at 08:38:37:


Have you ever purchased on Land Contract with a VA loan AND a private lender?


  • 1st mortgage is VA backed and in serious default
  • Funds used to bring loan current and do repairs are being provided by a private lender who will hold a 2nd mortgage

Options I see:

  1. Have private lender secure funds with a note and mortgage from the original homeowner as Grantor. Homeowner then sells on a Land Contract with the VA loan and the new private lender loan in place
  2. Buy it Subject To anyway

Have you ever tried to get “Special Approval” (as defined by the VA Handbook and Servicing Guide)? Apparently, the VA may grant “Special Approval” to allow a transfer Subject To without releasing the original borrower from liability once the borrower has demonstrated that they are unable to make further payments and the transfer is intended to prevent foreclosure.


Re: Countrywide / Sub2 - Posted by Rob Ricker

Posted by Rob Ricker on January 18, 2003 at 19:47:01:

You are correct. Land Contracts are protected on a VA backed loan. Also, the bank can’t call the loan due under other circumstances without VA approval. Kind of ironic with Countrywide’s loan-calling history that they seems to get most of the VA loans.

Because they CAN (nt) - Posted by BR

Posted by BR on January 17, 2003 at 09:38:25:


separate lease and option for seller - Posted by Bryan-SactoCA

Posted by Bryan-SactoCA on January 16, 2003 at 17:36:08:

Could this situation be avoided by doing a separate lease and option with the seller as to eliminate the equitable interest? I know that a L/O investor takes pains to avoid an equitable interest with the buyer, thus the need for separate lease and option documents. But the idea is with the combined lease/option form with the seller is that the seller can’t get rid of you that easy because you have an equitable interest. But if you have equitable interest then you also have equitable title, thus triggering the DoS call.

Re: Why banks call Notes Due - Posted by Brian (ATL)

Posted by Brian (ATL) on January 16, 2003 at 15:02:28:


Thanks for your reply.

I understand why they call the note due - but am trying to poll the Creonline forum to learn of any other similar experiences with Countrywide. I’ve done 7 Sub2 deals to date, and have had no issues with anyone calling the note due.

I only buy what I can afford to refinance into my name if forced to.

I agree with you, if I were the bank and knew what was occuring, I would call it due. But, the reality of the situation is that banks have the option to do this, but typically do not exercise that option.

Anyone else have experiences with Countrywide – good or bad relating to Sub2 and L/O?



Re: separate lease and option for seller - Posted by Sean

Posted by Sean on January 16, 2003 at 19:22:58:

An option from my understanding is considered an equitable interest. Whether or not there is a lease attached. I could be wrong on this, but leasing an owned property will not trigger a due on sale clause, unless of course the loan has some stipulation of the term of owner occupancy.

It is that option that creates the equitable title transfer, from my limited understanding of such things.

Though I do agree, it is always better to have a seperate lease from the option. I don’t think I would ever use 1 form for both… it would be too easy to put in front of a judge by a leasor claiming they were the buyer, not a renter. Obviously wrong, but may not be the way some bleeding heart judge may want to see it.

With 2 seperate documents, I think you give yourself a layer of protection. I don’t agree however that 2 seperate documents eliminate the equitable title issue.

I am sure some legal eagle will straighten me out, if I am misunderstanding this.

Re: Why banks call Notes Due - Posted by Nate(DC)

Posted by Nate(DC) on January 16, 2003 at 17:12:59:

I did one with them and it was not called due. Although, I flipped the property within 3 mos and paid off the loan in full, so I don’t know what would have happened if I had held it longer.